For purchasing, the next strategic sourcing opportunity in travel is meetings management
By Susan Avery -- Purchasing, 3/13/2008 2:00:00 AM
At Genzyme Corp., Ray Mazzoleni counts corporate travel as one of his purchasing responsibilities. Under that umbrella falls meeting planning. For this spend category, Mazzoleni's role as corporate purchasing manager for services is to review agreements with hotel properties that the Cambridge, Mass.-based biotech firm contracts with for meetings and to select suppliers that provide meeting services for larger events the company holds.
"Our primary involvement is to check for risk and liability," he says. "We attach an addendum to the agreement that addresses such issues as cancellation. That's big for any company. You hear stories all the time about someone signing an agreement without reading and understanding the property's policy on this. It can be costly."
Mazzoleni is one of a growing number of purchasing professionals who now shares some responsibility for his company's annual meeting planning buy. Companies that hold meetings regularly to help generate revenue such as those with large sales staffs or extensive distribution networks have long involved purchasing in the buy. Other companies that have fewer large meetings—and perhaps many small meetings throughout the year—now are looking to purchasing for help with the buy.
Meeting planning has the attention of CPOs and other top managers at companies across the nation these days for several reasons: new availability of spend data (often generated by new technology tools), need for control over processes and risk mitigation (especially important for compliance with Sarbanes-Oxley requirements) and purchasing's growing involvement in—and success with—the travel buy.
Chris Wilkes, meetings management practice leader at American Express Business Travel Services in New York, hesitates to use the cliché "last frontier," but says that as more companies bring much of what they buy under control, "meetings really are the last area that are still unmanaged. It's come under scrutiny for that. It's such a large spend and companies need to understand it better."
Analyzing the spend. Not many companies have a clear understanding of the meeting spend, which varies by industry. Pharmaceutical companies, for example, hold large meetings or events to market their products and tend to have bigger spends than, say, manufacturing. For most companies, Wilkes estimates the spend to be "roughly equivalent to annual spending on air travel."
Tony Wagner, vice president of meetings and events, North America at Carlson Wagonlit Travel in Minneapolis, Minn., says a company can figure its meetings spend to be approximately 20–30% of its annual T&E (travel and entertainment) tab. As a definition for corporate meeting, he uses "more than 10 people traveling to a destination (or 10 room nights)." All told, the market for meetings in North America is approximately $75 billion, he says, basing this estimate on figures from a recent study by PhoCusWright in Sherman, Conn., for all types of meetings and events.
Involving purchasing in a spend this size provides untold benefits for a company. Industry experts say cost savings can range from 10–25%, which can be an enormous amount depending upon the company.
Still, a company should determine whether it's worth the effort to go after the savings. "If your analysis shows 85% of meetings are for fewer than 50 people and 65% are for fewer than 25, the savings percentage is fairly low, probably around 10%," Wagner says. "There may not be a pay-off. The more people attending yield a higher savings. For complex meetings, the figure can reach 25%. The mix of meetings determines overall savings and how many resources are needed to deploy a strategy."
Generally, savings can be had through negotiations with hotels and transportation companies, i.e., purchasing can leverage spend with suppliers that provide services to both transient travelers and meeting attendees.
But it's not like purchasing other spend categories and sometimes more is not better, says Connie Cirillo Freeman, vice president at Management Alternatives, a business travel consulting firm in Norwalk, Conn.
"With hotels, for instance, additional room nights may not be better for the hotel," she says. "But there may be particular properties that you can select as best value for your transient travel and, say, small, less complex meetings that simply require a good meeting room, audio-visual equipment and proximity."
"But things are changing. Hotel sales forces, for one, used to be segregated [between selling to customers with transient travelers and those buying rooms for meetings], but that's changing over time. It's good to know your volumes and your ability to shift patterns, that is, if you can make a change as to when people are coming and using the hotel. You're less flexible with transient travel."
Then, once a meeting program matures, there are savings resulting from demand management. CWT's Wagner describes one client company with a fairly large sales force and distribution network. The sales force had an annual meeting and regional meetings at different locations around the country. The executives would get on planes and fly to these meetings. "We identified this as an internal efficiency cost," he says. "There is an opportunity based on location where they could have the events back to back if they were held at the same property, perhaps northeast and southeast regional meetings in Virginia."
Another important benefit to involving purchasing in the meetings spend is risk mitigation. Having an individual who doesn't have authority to approve the purchase of a box of pencils sign a contract with a cancellation policy could cost the company thousands of dollars.
And, there's an effectiveness benefit too. "When you start to engage professionals and have rigorous and consistent processes, it will trickle down and be a good experience for meeting attendees," says Kevin Young, vice president of marketing at StarCite, meeting solution providers in Philadelphia.
Purchasing's role. Most companies find the meetings spend to be challenging. Even for purchasing operations that buy services, meetings is not considered "a low hanging fruit", mainly because it is so fragmented. Administrative assistants tend to arrange most small meetings. Larger meetings or events are usually set up by outsourced providers or in-house planners who outsource some of the work.
As purchasing pros take on increasing responsibility for the spend, they find there's no single organizational structure that fits all companies. At some, a member of the purchasing team is a meetings specialist who understands nuances of the spend. At others, a member of the meetings team manages relationships with suppliers, working on behalf of purchasing. "It doesn't have to look one way or follow a certain structure," says Young. "What's important is the mindset." That is, purchasing should approach the spend with an understanding of the hospitality and travel industry.
Wagner at CWT suggests purchasing professionals getting involved in the meeting planning spend for the first time begin by building a business case. Most important, he says, is to determine results to be gained through the involvement—savings, control, risk management—and then to gather data on the spend.
This is perhaps one of the biggest challenges. Most companies have limited data on the meeting spend. Their best bet, Wagner says, is to look at corporate card or meeting card spending as well as purchase orders. Another hint: Scrutinize transient travel spending to destination cities for a spike in volume that's above the norm. It's probably a meeting. He also suggests building a meetings registration site and tying payment of an invoice or card bill to using the site as a way of gathering spend data on meetings.
The next step is to put processes in place for sourcing, contract and fulfillment.
In his recommendation to companies interested in developing process for the meeting spend, Young at StarCite leans toward some centralization. "A central team can consolidate strategic program components and build a network of preferred suppliers, having one place to house it, communicate it, own it," he says. "A company will have better compliance and results by moving to centralization."
CWT's Wagner, who prefers not to use the word centralize, offers a similar suggestion. Rather than centralize, purchasing may put processes in place that help meeting planners do their jobs better. "Most people don't like sourcing and negotiating contracts, managing attendee registration websites and reconciling invoices," he says. "But they do like picking menus and setting agendas. It's possible to put a process in place to do that and still get the desired control, savings and risk mitigation."
Be sure to read Ray Mazzoleni's blog,
, on Purchasing.com
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